TransCentury eyes tighter EA Cables grip in share swap

TransCentury and private equity firm Aureos East Africa Fund LLC have entered into talks that will see the latter exit their joint investment in East African Cables.

TransCentury and Aureos East Africa own a 68.38 per cent stake in the firm through Cable Holdings Limited. TransCentury is the majority shareholder in Cable Holdings with a 94.8 per cent while Aureos owns the remaining 5.2 per cent.

Under the proposed deal, TransCentury will acquire all shares in Cable Holdings and in exchange offer its listed shares to Aureos East Africa.
The share swap is meant to make it easier for the private equity fund to exit the cables business.

“Our partner is a private equity firm. They are exiting the cable business and investing in TransCentury,” TransCentury chief executive Gachao Kiuna told the Business Daily.

The share swap, however, is subject to approval by the regulators.

“Completion of the proposed transaction is conditional on receipt of regulatory approvals from the Capital Markets Authority and the Nairobi Securities Exchange,” he added.

TransCentury said that a circular would be sent to shareholders with details including the rationale and terms of the transaction.

Analysts said that the deal would cause a small dilution for TransCentury’s shareholders while diversifying Aureos portfolio into infrastructure, power, transportation and finance industries where TransCentury has footprints.

“At current share price, this is probably a transaction worth about Sh150 million. This will mean Aureos will then get about five million shares in TransCentury representing just two per cent dilution to TransCentury shareholders,” said Mr Eric Musau, an analyst at Standard Investment Bank.

Private equity funds invest for a definite period, five years in the case of Aureos which makes a typical investment of between $500,000 (Sh42.5 million) and $4 million (Sh340 million).

Aureos was jointly formed in 2001 by CDC and Norfund. The International Finance Corporation, Norfund and the PTA Bank as some of its investors.

The main benefit to TransCentury is that they will remove the inconvenience of having a minority shareholder in Cable Holdings.

TransCentury is in the infrastructure sector through its subsidiary Civicon in which it owns a 60 per cent stake. The subsidiary firm has been servicing the oil, gas and mining sector by constructing access roads and other infrastructure.

In transportation it has a 34 per cent stake in Rift Valley Railways (RVR) which runs the Kenya-Uganda railway and also has exposure to the oil and gas sector.

RVR runs the Tororo-Pakwach section (Uganda) which is 10 kilometres from Tullow Oil’s Block 1 in Uganda.

Shareholding in RVR is expected to change after TransCentury recently announced that it was in with talks with other shareholders in the venture.
Investment in the finance sector is through Development Bank of Kenya in which it owns a 10.7 per cent stake.